Transitory Income Changes and Consumption Smoothing: Evidence from Mexico

Manuela Angelucci, Carlos Chiapa (), Silvia Prina () and Irvin Rojas ()
Additional contact information
Silvia Prina: Northeastern University
Irvin Rojas: Centro de Investigación y Docencia Económicas

No 14452, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study how 3,534 beneficiaries of PROSPERA, Mexico's cash transfer program, smooth food consumption around the transfer payday, an anticipated and transitory income shock. We find that food consumption and food security do not change around the transfer payday, including for recipients with impatient or time-inconsistent preferences and households with higher than median transfer dependence. Conversely, health and employment shocks (unexpected and less transitory income changes) reduce food security. The transfer's relative illiquidity may act as a commitment device, helping time-inconsistent and less experienced debit card holders smooth consumption.

Keywords: permanent income hypothesis; consumption smoothing; payday (search for similar items in EconPapers)
JEL-codes: D12 D91 E21 I12 I38 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2021-06
New Economics Papers: this item is included in nep-dev, nep-hea and nep-mac
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Citations: View citations in EconPapers (2)

Published - published in: Journal of Public Economics, 2024, 230, 105013

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Journal Article: Transitory income changes and consumption smoothing: Evidence from Mexico (2024)
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